It’s not every day when you get to witness something you’ve worked for become law.
You may have seen news coverage of “the Fiduciary Rule” — on Wednesday, April 6th the Department of Labor announced changes to the 40 year old ERISA law covering retirement savers. The law brings sweeping changes to the protections for retirement savers, and is wonderful news for all Americans. We at Evolution Advisers welcome it.

Why is this big news? If you ask most people if their broker or insurance agent is supposed to put their client’s interests first, they’ll probably say yes. The sad truth is that’s wrong, brokers and agents have not been required to make recommendations solely in the best interest of their clients. This law is a step in the right direction.

As the chair of NAPFA’s public policy committee for the past two years, I am delighted and surprised to see this day. It’s a bit of a David and Goliath story, too — our little Financial Planning Coalition was outgunned and outspent by the mammoth opposition lodged by big Wall Street firms and insurance companies and their trade associations. If you’d like to learn more about this thousand page law, I would love to hear from you. For most of you, this summary should suffice:

Here’s what you need to know about the “Fiduciary Rule”
Nothing changes for you, as a client of Evolution Advisers.
We have adhered to the fiduciary standard for over a decade. In fact, our fiduciary principles are more stringent than this new law.
The law curbs much bad behavior by salespeople.
The intent of the law is to prevent stock brokers and insurance agents from steering their clients into high commission, high cost products that may be profitable for the salesman, but not in the best interest of the client. The new law extends protections formerly covering only savers in 401(k) and pension plans to all retirement accounts.
The core of the rule is called the “best interest contract exemption” (BICE), requiring stock brokers and insurance agents to disclose their conflicts of interest and presumably remove some of them.
The exemption, however, provides certain opportunities to skirt around a true fiduciary standard so long as the client agrees. The BICE was a major concession to big brokerage and insurance companies, and one we in NAPFA could not wholeheartedly support, yet the only way for the DOL to move the law in the right direction in today’s political landscape.
The law is great news for all Americans…except some insurance agents and stock brokers.
Wall Street and the Insurance industry opposed this rule vehemently — and continue to work to overturn it. They have $17 billion reasons not to like it (the estimate of how much they’ve overcharged American retirement savers). They argue it will reduce consumer choice, increase costs and shut out smaller investors from receiving advice. This is untrue. Foremost, brokers and agents do not offer advice — they sell products. Further, thousands of Fee-Only and fiduciary advisers across the country work with clients of all levels of wealth and stand ready to serve more.

What comes next?
The SEC is preparing a rule that will likely extend a similar level of protection beyond your IRA and 401(k). With hope, a proposed SEC fiduciary rule will contain similar protections for Americans — and that means Wall Street lobbyists will be plying the halls of Congress again, working to protect their bonus pools. You know the difference of working with a true fiduciary, and we are working to make that the standard all Americans receive.

Dave O’Brien, CFP®